Dianor Resources Inc V.DOR

Poor Dianor always in someones crosshairs....commo

[chumpisme]

Algoma Steel Discloses Royalty Rights on Diamond Property....Dianor

Published 2/9/2006

TORONTO (CP) -- Algoma Steel Inc. [TSX:AGA] disclosed in its fourth-quarter results that it holds royalty rights on a northern Ontario property where diamonds have been discovered.

The unusual disclosure comes as the steelmaker battles a major shareholder who is attempting to force a cash payout and have the directors replaced.

Despite the amount of time management is spending on the shareholder issue, ''we remain focused on exploring and developing strategic alternatives in this rapidly changing industry,'' CEO Denis Turcotte said on a conference call with analysts Thursday.

''On another matter, the company announced it holds a 10% royalty on lands in Wawa, Ont., a little town about two hours north of the steel plant, owned by a company called Dianor Resources,'' Turcotte continued.

''Dianor is conducting a diamond exploration program on this property and has recently reported the occurrence of diamonds.''

One analyst said this early-stage disclosure is another volley in the game between Sault Ste. Marie-based Algoma and New York hedge fund Paulson & Co.

Turcotte and the board are trying to illustrate how well they know the company and its future prospects, the analyst said.

At this stage, it is unknown if Dianor's find will result in any funds for Algoma.

''The game (for Algoma) right now is, how do we get past the shareholder vote,'' said the analyst, who did not want to be identified.

Paulson owns about 19% of Algoma's shares and wants the steelmaker to payout more than C$400 million in cash to shareholders.

Algoma has been forced to call a meeting for March 22, where shareholders will vote on a new slate of directors put forward by Paulson.

Late Wednesday, the steelmaker reported a 55% drop in its fourth-quarter profits to C$55 million.

On Thursday's call, Turcotte said of the diamond property: ''We didn't disclose anything up to this point of time, because there wasn't really anything to disclose. We don't think there's a lot of materiality here to report to you, but it is an interesting development we wanted to make sure our shareholders are aware of.''

Algoma, which is more than a century old, ''has got property all over Ontario, in particular all over northern Ontario, from the days when people were prospecting and searching for iron ore or for iron deposits,'' Turcotte said.

As it has been selling properties, it was retaining profit-sharing rights through royalty mechanisms in case discoveries were made. Algoma retained a 10% royalty on the Dianor property.

The steelmaker still holds nearby properties, and Turcotte said it recently declined to sell those to Dianor.

''Our mind is turned to how we maximize whatever the potential is out of that site for our shareholders,'' he said.

One analyst on the call questioned why Algoma stopped buying back its stock last fall. Companies buy back their own shares to boost the value of the stock.

''It was just our view in discussion with counsel that given the Paulson proposal, issues associated with that, as well as activities that were underway, it was safer not to be purchasing stock,'' Turcotte said.

Turcotte reiterated that Algoma ''will continue to consider future distributions of cash, provided the cash distributions are consistent with the company's other needs, including other investment alternatives.''

He said again that he believes the steel industry is in ''a period of substantial uncertainty with respect to the cost of iron, energy, and the price of steel products.

''The board believes it is appropriate in this environment to maintain a significant level of liquidity and financial flexibility for a period of time. This would be compromised under the Paulson proposal.''

The CEO added that the board is concerned Paulson's proposal ''is only designed to enhance liquidity for one very large holder at the expense of the rest of the company's shareholders post-transaction.''

In coming weeks, Algoma will mail out a circular to shareholders that will detail the company's position in the battle and will include an advanced tax ruling from the Canada Revenue Agency on the implications of Paulson's proposal, executives said.

In its results, the company cautioned that ''steel pricing realizations may decline slightly in the first quarter versus the fourth quarter due, in part, to the effects of a stronger Canadian dollar.''

Its fourth-quarter earnings fell as steel prices averaged C$751 per tonne, down from C$878 in the fourth quarter of 2004, while costs of iron ore, natural gas, and coal rose.

Algoma said it does not expect any major changes to unit costs in the first quarter.

Its shares gained 75 cents to close at C$28.95 on the Toronto Stock Exchange Thursday.


Mr. John Ryder became the President of Dianor in January 2002 and has over ... During his professional career he has filled various positions at AlgomaSteel Inc.